Corruption and Trade

Alex Tabarrok notes that American furniture manufacturers are essentially using trade law to extort money from Chinese manufacturers--putting them on the review list for "dumping" (selling below cost in order to gain market share), and then taking them off the list when they get a large payment. Alex doesn't like it much:

The Chinese firms have paid millions of dollars to Lay-Z-Boy (really, I am not making this up) other US furniture makers and to their bagmen lawyers to avoid having the ITC sicked on them. I suppose one could argue that the payments are an efficient way of redistributing the gains from trade. The question then becomes why are US firms assumed to own the rights to sell to US consumers?

The answer, of course, is that they don't, and that this is outrageous behavior. Obviously, I don't support laws against dumping, one of the most egregiously abused trade restrictions for which there is very little real-world evidence.

And yet, politically, this may be a good thing. If the manufacturers were not getting these side payments, they might be pressing for even tougher laws. In an ideal world, this sort of corporate welfare combined with a little not-so-friendly blackmail would never be possible. In the messy world we live in, where trade restrictions are often very possible, this might be better than the alternatives.

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